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Good morning. Jeff Sparshott here with the latest on trade, China’s improving economy, Europe’s struggling economy, a preview of Friday’s jobs report and why Germans save until it hurts. Send us your questions, comments and suggestions by replying to this email.

The Waiting Is the Hardest Part

President Trump said he was willing to wait until after next year’s presidential election to strike a limited trade deal with China, sending stock prices down and casting doubt on whether the two sides will find enough common ground to head off new tariffs. But doesn’t mean that talks are about to fail: Mr. Trump’s remarks probably indicated an effort to gain leverage during the last two weeks before a Dec. 15 deadline for new tariffs on consumer goods, said U.S. officials and close allies of Mr. Trump. The U.S. side points to the recent involvement of White House adviser Jared Kushner, the president’s son-in-law, as evidence that the talks are nearing conclusion. Mr. Kushner acts as a kind of interpreter of what Mr. Trump would find acceptable in a deal and has worked well with U.S. and Chinese trade officials, Bob Davis and Lingling Wei report.

There’s a lot riding on a trade truce, including economic forecasts. For the most part, economists expect the U.S. to exhibit slow but steady growth, with little in the way of heightened recession risks that beset markets earlier this year. Goldman Sachs, for example, expects gross domestic product to grow 2.3% next year, matching 2019’s estimated pace, but with far less volatility. But such benign outlooks are predicated on easing trade tensions, Justin Lahart writes. 2020 could get a lot more interesting than many expect.


President Trump is in London for a NATO summit this morning. He is scheduled to arrive back in Washington around 8:30 p.m. ET.

The ADP employment report for November is expected to show a net gain of 150,000 private-sector jobs. (8:15 a.m. ET)

IHS Markit’s U.S. services index for November is out at 9:45 a.m. ET.

The Institute for Supply Management’s nonmanufacturing index for November is expected to tick down to 54.5 from 54.7 a month earlier. (10 a.m. ET)

The Bank of Canada releases an interest-rate announcement at 10 a.m. ET.

The Federal Reserve’s Randal Quarles testifies on bank supervision and regulation before House Financial Services Committee at 10 a.m. ET.

Corrections & Amplifications: Tuesday’s newsletter had incorrect dates for the Bank of Canada’s interest-rate announcement and Fed Vice Chairman Randal Quarles’ testimony. Both are today.


High Hurdles

China said it would retaliate if the U.S. presses forward with sanctions over Beijing’s repression of Uighur Muslims—Washington’s second stand on China human rights in recent days. After the House of Representatives passed a bill requiring sanctions on officials responsible for the widespread detention of Uighurs in China’s Xinjiang region, Beijing issued furious statements Wednesday calling it interference with China’s internal affairs under the pretext of human rights. The bill must be reconciled with a version passed by the Senate in September before it can become law, Eva Dou reports.

China’s economy, meanwhile, looks a little better positioned to withstand potential tariffs. The Caixin China purchasing managers index for services rose to a seven-month high in November, signaling a pickup in growth as the year winds down. “China’s economy continued to recover in November, as domestic and foreign demand both improved. But business confidence remained subdued, reflecting the impact from uncertainties generated by the China-U.S. trade conflicts. That will restrain a recovery in economic growth,” said CEBM Group’s Zhengsheng Zhong.

Europe’s economy is looking weak. Service-sector activity softened slightly in November and overall economic activity remained near the lowest level in the past six-and-a-half years. “The survey data are indicating GDP growth of just 0.1% in the fourth quarter, with manufacturing continuing to act as a major drag. Worryingly, the service sector is also on course for its weakest quarterly expansion for five years, hinting strongly that the slowdown continues to spread,” said IHS Markit economist Chris Williamson.

U.S. service-sector data is out this morning.

Jobs, Jobs, Jobs!

The most important economic indicator this week comes Friday: the November U.S. employment report. Economists are forecasting a net gain of 187,000 jobs and a steady unemployment rate at 3.6%. Both would be signs of a healthy labor market. 

Wage growth, however, is losing momentum despite the unemployment rate trending near a 50-year low. Friday’s jobs report is expected to show average hourly earnings advanced 3% from a year earlier for the third straight month. Indeed economist Nick Bunker says flat wage gains suggest the labor market isn’t as tight as a 3.6% unemployment rate implies: “Employers are still able to fill positions, often without pushing wages too much higher.” The pace of hiring has cooled this year and the share of Americans with jobs or looking for work remains below prerecession levels. Pay raises have been higher, however, for nonsupervisory workers. Wage growth for workers in certain low-wage industries, such as clothing stores and casinos, has outpaced other sectors. —Eric Morath

Save Until it Hurts

Saving is viewed in Germany as a tradition and a virtue. This goes for consumers, who are stashing cash in mattresses and checking accounts; for the state, which has run a budget surplus for five years; and for companies, which are hoarding profits. The problem: In a world of negative interest rates, stockpiling cash has left German households poorer than their international peers, hindered German companies from investing in their future and restrained economic growth across Europe. Germany’s median household wealth is lower than Greece’s. Germans are the least likely of all Europeans to own their own homes. So why are Germans hunkering down and saving more, even after years of policies to encourage precisely the opposite? Some economists think German frugality isn’t a behavior easily changed by policy, but rather it is part of an identity built over three centuries of revolution, hyperinflation, wars, depression and dictatorship, Tom Fairless and Patricia Kowsmann report.


The U.S.-China Cold War has started. There’s no guarantee the U.S. will prevail. “China today poses a bigger economic challenge than the Soviet Union ever did. Historical estimates of gross domestic product show that at no point during the Cold War was the Soviet economy larger than 44% of the economy of the United States. China has already surpassed America by at least one measure since 2014: G.D.P. based on purchasing power parity, which adjusts for the fact that the cost of living is lower in China. The Soviet Union could never draw on the resources of a dynamic private sector. China can. In some markets—notably financial technology—China is already ahead of the United States. In short, 2019 is not 1949,” Stanford University’s Niall Ferguson writes in the New York Times.


Real Time Economics has launched a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.

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